Query 1]

I had purchased one office chamber in commercial complex in 1988, for Rs. 2 Lacs (WDV-2010, Rs. 27,000/-) and sold it this year for Rs. 32 Lacs. I am a senior citizen with income, from all sources, below exemption limit. Please tell me the tax treatment:
a. Whether benefit of sec 50, 54 will be available or not?
b. If not, what is the amount of tax to be paid? []


1. You have sold an office block on which you have been claiming Depreciation.

2. Section 50 provides that where a capital asset forming part of a block of assets in respect of which depreciation has been allowed, when sold, if the full value of consideration exceeds the block value of the asset, such excess shall be deemed to be the capital gain arising from the transfer of short term capital assets.

3. In your case, probably, office chamber appears to be the only assets in the block of fixed assets and after sale of the office chamber, the block ceased to exist and is resulting in surplus of Rs. 31.73 Lacs. If not opted for exemption as mentioned in subsequent paras, the surplus would be treated as short term capital gain and accordingly would be taxable as per regular slab of income tax.

4. The most important, & even academically interesting also, question here is whether exemption u/s 54F or U/s 54EC would be available or not? The general prevailing presumption is that no exemption u/s 54F or u/s 54EC is available on capital gain arising on transfer of depreciable assets. However, the discussion herein below would be of immense interest, not only the general reader, but also for the Tax Professionals as well.

It may be noted that a] Subject to other stipulations, Exemption u/s 54F is available, if the net sale consideration arising on sale of a long term capital assets (other than residential house property), is invested for purchase of a residential house property.

b] Similarly, exemption u/s 54EC is available, if capital gain arising on transfer of a long term capital assets, is invested for purchase of certain specified bondsc] Undoubtedly, exemption u/s 54F & U/s 54EC is available if the asset transferred is a long term capital assets.

For levy of tax on depreciable assets, the gain is treated as short term capital assets. However, for all other purposes, the asset remains a long term capital assets if it is held by the assessee for a period of more than 36 months.d] In your case, the office block purchased by you in the year 1988 is a long term capital assets and you are eligible for exemption u/s 54F or Section 54EC of the Income Tax Act-1961.

5. There is no explicit statutory provision to approve or disapprove the above viewpoints. However, the same views may also be inferred from the following judgments:a] CIT v. Assam Petroleum Industries (P) Ltd. (2004) 36 DTC 304 (Gau-HC) : (2003) 262 ITR 587 (Gau.)b] ACE Builders P Ltd v. Asst. CIT (2001) 76 ITD 389 (Mum) followed in CIT v. M/s Delite Tin Industries in ITA 1118/2008 dated 26th September, 2008.c] CIT v Rajiv Shukla, [Delhi High Court in ITA No. 620 of 2011 Decided on: 8 April 2011]

Query 2]

I had taken a loan for renovation of my existing house. Whether deduction towards repayment of interest and principal repayment of loan borrowed for repairing or renovation of home is allowable from my income? [******]


a] Deduction of Interest

Interest deduction u/s 24 is allowed in respect of the loan taken for repair/renovation of house property. However, in respect of such loan taken for self occupied house property, the maximum amount allowed is Rs 30,000/- only and not Rs 1,50,000/-

b] Deduction of Principal Amount

No deduction is available towards the principal repayment of the loan taken for repairs/ renovation of house property.